Tuesday, December 18, 2018

Bitcoin Bolsters Banks

There seem to be a lot of people thinking that banks should be “scared” of bitcoin, or that bitcoin will replace modern banking. This is simply not the case. To quote the FDIC “8.2 percent of US households are unbanked. This represents 1 in 12 households in the nation, or nearly 10 million in total.” An additional 10% or 14 million households are considered underbanked.

It is this unbanked and underbanked population that stands to gain the most from technologies like bitcoin. The pros for the unbanked population are clear, while the gains for the underbanked population are a little less obivious.

When banks deal with the underbanked they generally charge service fees to help recoupe some of their overhead.
Banks spend more on these customers than they earn, which is the root of service fees. These inefficencies are bad for both parties.

I would argue that banks would, for a large part be happy to see these customers go. These are ultimately relationships that must be soured for banks to maintain profitablity. The depature of these low value accounts would relieve regulatory burdens and free up resources to concentrate on relationships that are mutually beneficial.

It is in this way that bitcoin has a huge potential to help banks improve their bottom line. Better banking is good for all of us, even those who aren’t customers. The opportunity to reduce overall costs and improve banking efficency is good for everyone not just the banker or the bitcoiners.